Archive for October, 2007

online trading: Are you trading to make money?

October 30, 2007 Leave a comment

I know the subject line of this post sounds ridiculous but bear with me for a minute and I will have you thinking real hard about your trading. Online trading can be the most expensive but productive psychotherapy you will ever have. Ask yourself why you have chosen to become a stock trader. I am willing to bet $1 you will say to make money, to become wealthy, to pay my bills etc.

Well let me ask you another question: Do you make capital preservation your number one priority or do only focus on how much money you can make on a trade? Trading is a marathon, not a sprint. You must preserve your energy (capital) to last in this business. I have seen it time and again, new traders (any trader without a PROVEN track record) fund an account with $10,000 and lose 40% of their capital in the first month. Why does this happen with so much consistency?

Most traders enter the trading arena trading to prove themselves right. They don’t trade to run a business. Let me ask you a question: If you owned a local deli, would you spend 40% of your funding buying roast beef? Would you spend 40% of your capital on that much roast beef if you have never earned that much return selling roast beef before? Of course not.

The reason losses become so large is that new traders believe they need to know what is going to happen next to make money consistently. So what naturally flows from this thought process is that when they make a decision to enter a new position, they do so with the incorrect assumption that “know” what is going to happen so they put the trade on.

What happens next which incidently probably WILL happen 60% of the time, the trade will move against the trade and has reached a stop loss point. Now here is what makes the difference between a trader who is trading to make money and everyone else: A trader who is trading to make money will exit the trade without any hesitation. A trader who is NOT trading to make money will hold onto the trade because he is “right.” This is the zone where small, reasonable losses that are a natural part of the business become career ending.

This first of course asumes you ALWAYS have a predetermined stop loss BEFORE you enter every trade. If you do, monitor your trading today and pay attention if you are trading to make money or if you are trading to prove your brilliant analysis.

Profitable traders don’t trade to be correct, they trade to make money. The only way to do this is to keep losses small in relation to the risks taken. One more good question we teach in our Equity Trader 101 course is this: If you are ever not sure about a position you are in ask yourself this: “If I did not have this position, would I want it?” The first answer that comes to mind will always be what you feel in your gut about the position. Good trading!

Categories: Psychology

online trading:7 keys to profitable trading

October 16, 2007 1 comment

Deciding to trade full time for a living is making the decision to open your own business. Here are 7 keys to making it successful:

  1. Do your homework. The stock market is an arena of abundance, make sure you join the arena with a written plan.
  2. Set aside at least 3-6 months to learn how to first not lose money, then to learn how to make money. All the trading books and seminars in the world are not nearly as valuable as “screen time.”
  3. You must be properly capitalized. The money you fund your trading account with must be RISK capital. If it is money you will need in two months to pay your rent, you will have a hard time trading to win, you will be trading scared.
  4. Know what type of market conditions you are going to trade. Are you going to be a trend follower or a scalper? Trend following takes patience and can have significant drawdowns, scalping requires making many trades and usually has a 1-1 risk reward ratio. Profits and losses will be small.
  5. Truly understand you are trading to make money, you are not trading to be correct. Most new traders think you need to know whats going to happen next to make money, you don’t. You need discipline to follow your plan, nobody knows what is going to happen next. The sooner you can get over the desire to “be right” on your trades the sooner you will turn the corner to profitability.
  6. Learn how to keep your focus positive. Trading can be a very trying journey, soak in good motivational books. They are as important as any trading book you will every buy.
  7. Learn from your mistakes. You MUST keep a journal. It is your personal history of what you do well and what you need to work on. You are paying for those lessons in the form of trading losses, take the lessons home.

If you need help working on your trading plan send us an email with your current trading plan and we will be more than happy to make some suggestions!

Categories: Beginner education

Online stock trading

October 12, 2007 1 comment

Far too often we see potential traders who still see 1999 on the calendar when they come to inteview for a position. You would think after all this time has elapsed a persons expectations when entering the business would be back to normal. While it is very possible to make a terrific living as a trader, you still need to put in the time to learn the craft of trading. Learning how to read a chart does not mean you now understand how to make money, it means you can recognize what happened.
The skill that will make you a trader, a trader who makes money is that of learning how to manage the person at the keyboard. Can that person be patient when there is nothing to do? Can you “push it” on a day the market is screaming to trade with more leverage? How will that person react when a well thought out trade moves against you? Do you have profit taking strategies for many market conditions?

If the market is obvious and trading with good volume you should expect follow through and you can add to your positions. If the market is choppy with no clear direction your expectation for the trade should be less. Are you paying attention and trading what is in front of you are are you projecting on to the market what you want to happen?

All of these scenarios and skills can only be learned over time. You must trade a live account to learn how to trade but you must keep your share size small per trade untill you learn how to be gross positive consistently.

Trading for a living is very possible for you. Just make sure you enter the business with the the right frame of mind that you need to learn a skill. If you would like to learn about trading our capital and getting the proper training and mentoring to manage a trading account we encourage you to get in touch with us. We will allow you to trade our capital remotely once you finish our training programs.

stock trading: finding the easy trades

October 3, 2007 1 comment

I am sitting here at my screen managing risk for over 500 traders. It still amazes me how many traders make their job as hard as possible. The biggest errors I see on a consistent basis are fighting the trend and picking tops and bottoms.

When I bring this up to those traders in meetings the answer is usually the same, I want to catch the big moves. I have news for you, good trading is very boring. You as a business owner (yes you own a business if you are a trader) should be concerned with making your equity grow consistently. You should not spend your day looking for homeruns. They are far and few between to rely on to earn a consistent living.

Find a trend! Spend your day and your homework time looking for an obvious bias to trade. Then trade that bias and only that bias. Do no countertrend trading at all untill you can be consistently positive

Categories: Psychology